New Delhi, Nov. 20: The finance ministry will try to push some seven bills for passage in the winter session of Parliament, including bills to reform the insurance and pension sectors. The session starts on Thursday.
Pundits say it is unlikely to gain a clear mandate for amendments to the insurance act. In September, the cabinet cleared a proposal to raise the foreign investment limit in insurance to 49 per cent from 26 per cent at present.
The govt is also planning to push a legislation to introduce options trading in commodities — which proponents believe will give a new “price discovery” option to farmers. Detractors have, however, slammed the move to give the sharks who play the futures markets just one more speculative instrument.
Options trading was banned when India launched forward trading in 1952 and had always been viewed with suspicion.
The Bombay Cotton Trade Association — established in 1875 — is the world’s second oldest futures trading market after the Chicago Board of Trade. Futures trading was banned during the second world war and resumed in fits and starts in the sixties.
Insurance, pension funds
The BJP, the principal Opposition party, had agreed to support the insurance bill, provided the FDI cap was retained at 26 per cent.
However, with the government deciding to hike the cap, the BJP has made it clear that it would oppose the bill. This would make it rather difficult for the UPA to push the bill through in Parliament.
The government does not expect any major hurdles before the pension bill, finance ministry officials said, despite a clause that links FDI in pension funds with the cap in insurance.
“If Parliament does not agree with the insurance amendments, FDI in the pension sector stays at 26 per centů if it agrees then it goes up,” officials said.
Trinamul and the Left are opposing both the bills and are expected to vote against them. Floor managers say this will not affect the pension bill.
The Forward Contract Regulation Act (Amendment) Bill, to be taken up for voting in this session, seeks to give more power to the forward market regulator and do away with section 19 of the act that prohibits options trading in commodities.
An option gives the holder the right to buy or sell a specified amount of a certain commodity at a fixed price until the date the option expires. However, the holder isn’t obliged to actually exercise the option.
The Trinamul Congress and Left will oppose the move as they fear options trading can lead to a speculative price spiral in food items.
Analysts, however, say food price rise does not have much to do with options but is linked to a global price spurt in commodities.
New banking licences
The banking bill will strengthen the RBI’s oversight powers, and can pave the way for the issue of new bank licences by the apex bank.
The RBI had made it clear that new licences could be issued only after this act comes through as the higher number of banks would need a greater power of oversight to check any misuse.